Q4 market update here including a condensed video format version! This one has taken longer than normal, our apologies!
Q4 ended even stronger than expected. Normally Q4 is a slower part of the year and it certainly was not the case this year. Prices moved up a strong 7%+ cumulatively for the year (I had predicted 5-7%) and inventory ended at a scant 2 months. Tier-1 homes (priced right, no major flaws and wow factor) sold within days with multiple offers and average of 3-5% over list price. In some cases higher. Tier-2 properties (mostly a Tier-1 but with one flaw such as needing cosmetic updates) averaged 40-60 days on the market and about 3-5 % negotiability. Tier-3 (major issues or work) sat on the market 90+ days and 10% negotiability.
Q1 has gotten off to a blazing start. Similar to Q4, normally Q1 is a slower time of year. The velocity of pendings in Q1 has been incredibly strong; don’t be surprised if this ends up being a record January and February. Averaged across all price bands/sectors, market supply is at 1.8 months which is considered a very low inventory/ high appreciating environment. For context, a 6-month supply (enough inventory to meet current rate of demand 6 months out) is an equilibrium market. At 1.8 months, it’s the lowest it has been in 3 years.
$0-$500k We are at 2 months or less, severely undersupplied and I think we will see 8%+ appreciation this year.
$500k-$1M We’re at about a 3-month supply (vs 5 mths in Q4). I’m projecting 7%+ for the year.
$1m-$2m We’re at a 7-month supply (vs 9 mths in Q4). I’m projecting 6%+ appreciation for the year.
$2m+ Has remained undersupplied (as long as it’s highly relevant to today’s cleaner lines and transitional aesthetics), otherwise it’s sitting. I’m projecting 6% appreciation here and current supply is at 5 mths.
Significant factors in the market (3:12):
The main factors leading to the current market environment:
Job growth – Austin’s economy added 30k-35K net jobs last year and only a 2.5% unemployment rate along with strong lifestyle relocation figures. The combination created strong demand for housing and Austin landed #2 on the Fastest Growing Top 50 Metros.
Cost of Construction and Labor Shortages – These costs went up at least 10% last year and labor alone expected to move up 2-3% a MONTH this year. This puts pressure on inventory and rising prices.
Interest rates remained low and expected to remain low through 2020.
Looking Ahead (4:12):
I see 2020 ending with 7-10% appreciation, possibly higher. We are definitely in a momentum year in terms of appreciation and demand this year.
All price bands will perform very strongly, including above $2m+.
Core sectors up to $3M will be very busy in central. Within city limits (but not central or suburbs); it’ll stay robustly active with high demand up to $1M and for the first time prices reaching beyond $1M. In the suburbs, up to $800k will be very healthy.
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